"Bank loan growth in Estonia was more than twice as fast as the euro‑area average," noted Bank of Estonia economist Taavi Raudsaar. "The housing loan portfolio is still growing the fastest, with the loan balance increasing by nearly 10 percent."

Former Bank of Estonia president Madis Müller said in an interview that it is not surprising that loan growth in Estonia is faster than the euro‑area average — this has been the case for some time.

"Our loan volumes have grown steadily throughout the past year," Müller noted. He added that this is a sign the Estonian economy is quietly gathering strength.

"If both companies and individuals are willing to take on new obligations and invest, it means they believe in their future ability to service those loans and in the growth of their incomes," he said.

When the economy improves, it usually brings slightly faster overall price increases. However, inflation has continued to slow, and the Bank of Estonia expects it to reach around 3.4 percent this year.

Export‑oriented companies in Estonia have begun to perform better, and domestic‑market companies also have a more positive outlook this year as people's purchasing power and incomes have increased.

"For an average wage earner, net salary is more than 10 percent higher this year than a year ago," Müller said. "This certainly enables people to consume more goods and services, and this is one of the drivers of Estonia's economic growth this year."

Looking at how well mortgage borrowers and companies are managing their loan payments, the share of clients in difficulty is very small. Only 0.2 percent of the entire mortgage portfolio is more than 60 days overdue. Overall, Estonian borrowers are handling their payments very well.

Müller noted that loan volumes are also rising partly because housing prices are increasing. However, real estate prices have not risen by 10 percent annually, so the growth in loan volumes also reflects broader optimism.

--

Follow ERR News on Facebook and X and never miss an update!